American Water Works Company, Inc.

Good morning and welcome to American Water's third quarter 2024 earnings conference call. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. As a reminder, this call is being recorded and is also being webcast with an accompanying slide presentation through the company's investor relations website. The audio webcast archive will be available for one year on American Water's Investor Relations website. I would now like to introduce your host for today's call, Aaron Musgrave, Vice President of Investor Relations. Mr. Musgrave, you may begin.

Thank you, Cindy. Good morning, everyone, and thank you for joining us for today's call. At the end of our prepared remarks, we will open the call for your questions. Let me first go over some safe harbor language. Today, we will be making forward-looking statements that represent our expectations regarding our future performance or other future events. These statements are predictions based on our current expectations, estimates, and assumptions. However, since these statements deal with future events, they are subject to numerous known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from the results indicated or implied by such statements. Additional information regarding these risks, uncertainties, and factors, as well as a more detailed analysis of our financials and other important information, is provided in the third quarter earnings release and in our September 30th Form 10-Q, each filed yesterday with the SEC. And finally, all statements during this presentation related to earnings and earnings per share referred to diluted earnings and diluted earnings per share. John Griffith, our president, will share highlights of third quarter and year-to-date results and will comment on our 2025 EPS guidance and longer-term targets. David Bowler, our executive vice president and CFO, will discuss our year-to-date financial results in more detail, general rate case updates, our 2025 outlook, and our five-year financing plans. Cheryl Norton, our Executive Vice President and COO, will then discuss our new capital investment plan, including the expected impact of EPA's lead and copper rule improvements, and will conclude with comments on customer affordability and our acquisition outlook. Susan Hardwick, our CEO, will conclude with a look at our compelling investment thesis. After our prepared remarks, we'll then close by answering your questions. With that, I'll turn the call over to American Waters President John Griffith.

Thanks, Erin, and good morning, everyone. Let me start by saying how happy we are to have David in the role of CFO after having served as our deputy CFO and treasurer. You'll hear more from David shortly. And likewise, as we noted last quarter, I'm pleased to hand the business development baton to Cheryl, whose oversight of our state presidents in her role as chief operating officer is key to our business development activities as we continue to drive enhanced focused on origination activities at the state level. Let's turn to slide five, and I'll start by covering some highlights from the third quarter and year-to-date periods. As we announced yesterday, we delivered strong financial results in the third quarter in line with our expectations, adding to an already strong 2024. Earnings were $1.80 per share for the quarter compared to $1.66 for the same period last year. In the first nine months of 2024, earnings were $4.17 per share, compared to $4.03 for the same period last year. Our results reflect the clear execution of our plan in 2024, which David and Cheryl will discuss further. These results give us confidence to affirm our 2024 EPS guidance of $5.25 to $5.30 per share, which, as you recall from last quarter, represents our narrowing of guidance to the top half of the previous guidance range. As a reminder, our 2024 and 2025 EPS guidance ranges include 10 cents per share of incremental interest income from the amendment of the HOS note earlier this year, which is on top of the interest income from the original note terms that we are replacing with earnings from the regulated business. As we've said in the past, repayment of the note is a component of our long-term financing plan as a source of funding for our growth. I also want to highlight that just a few days ago, we closed the $230 million acquisition of the wastewater system assets of Butler Area Sewer Authority in Pennsylvania. Our Pennsylvania team, assisted by the corporate business development team, worked hard to complete this deal, which adds 15,000 customers who we are pleased to begin serving. Turning to slide six, we are initiating our 2025 earnings guidance of $5.65 to $5.75 per share. This represents 8% EPS growth in 2025 compared to our weather normalized 2024 EPS guidance, which David will discuss in further detail. As we roll out our updated five-year plan today, we are affirming our long-term targets, including 7% to 9% EPS and dividend compounded annual growth rates. As a regulated water and wastewater utility, rate-based growth, regulatory and capital execution, and operational excellence are the key drivers of growth for our company. We expect to achieve 8 to 9 percent rate-based growth over the next decade, driven by the accelerated CapEx plan we put forth three years ago to meet reliability, resiliency, and compliance needs. Our rate-based growth includes our regulated acquisition strategy, which drives a growing customer base, as well as the organic revenue growth opportunities we expect from our military services group. Along with our affordability and sustainability leadership, we believe these are the drivers of American Water's very competitive and sustainable shareholder return. In today's closing remarks, Susan will share her thoughts on our position as a premium regulated utility. In closing, on slide 7, I want to emphasize that we expect to achieve consistent EPS growth within the 7% to 9% range through 2029 and beyond. We are demonstrating in 2024 and with our guidance for 2025 that the business plan we set forth following the sale of HOS is strong and compelling. Our commitment to solving problems for our customers remains steadfast, including addressing PFAS, lead and copper, and aging infrastructure among other challenges. No other water and wastewater utility has the combination of the scale, geographic diversity, and expertise that we have. This foundation, coupled with the capital investment needs in our industry, uniquely positions American Water to achieve consistently strong earnings growth for many years to come. One final note before I turn it over to David. As you know, earlier this month, we notified stakeholders of unauthorized activity within our computer networks and systems, which we determined to be the result of a cybersecurity incident. Importantly, none of the company's water or wastewater facilities were impacted by this incident. While the investigation of the incident by a dedicated team of professionals is ongoing, we do not expect that this incident will have a material effect on the company or its financial condition or results of operations. With that, I'll hand it over to David to cover our financial results and plans in further detail. David?